Exercise 5-21 Complete the accounting cycle using receivable transactions (LO5-1, 5-4, 5-5, 5-7, 5-8)

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On January 1, 2021, the general ledger of 3D Family Fireworks includes the following account balances:

Accounts	Debit				Credit
Cash	$	26,500
Accounts Receivable		14,900
Allowance for Uncollectible Accounts					$	3,400
Supplies		3,800
Notes Receivable (6%, due in 2 years)		17,000
Land		80,200
Accounts Payable						8,300
Common Stock						97,000
Retained Earnings						33,700
Totals	$	142,400			$	142,400

During January 2021, the following transactions occur:

January		2		Provide services to customers for cash, $48,100.
January		6		Provide services to customers on account, $85,400.
January		15		Write off accounts receivable as uncollectible, $3,100.
January		20		Pay cash for salaries, $32,700.
January		22		Receive cash on accounts receivable, $83,000.
January		25		Pay cash on accounts payable, $6,800.
January		30		Pay cash for utilities during January, $15,000.

rev: 10_04_2016_QC_CS-64217, 10_02_2018_QC_CS-141245

Exercise 5-21 Part 6

6. Record closing entries. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

7.

Analyze how well 3D Family Fireworks manages its receivables: a-1. Calculate the receivables turnover ratio for the month of January (Hint: For the numerator, use total services provided to customers on account). (Round your final answer to 1 decimal place.)

a-2. If the industry average of the receivables turnover ratios for the month of January is 4.6 times, is the company collecting cash from customers more or less efficiently than other companies in the same industry?

multiple choice 1

• More

• Less

b-1. Calculate the ratio of Allowance for Uncollectible Accounts to Accounts Receivable at the end of January. (Round your final answer to 1 decimal place.)

b-2. Based on a comparison of this ratio to the same ratio at the beginning of January, does the company expect an improvement or worsening in cash collections from customers on credit sales?

multiple choice 2

• Improvement

• Worsening